Earnings Set to Take a Bite Out of Restaurant Stocks SHAK, LOCO

Earnings beats don't seem to be enough for SHAK and LOCO traders

The shares of restaurant stocks Shake Shack Inc (NYSE:SHAK) and El Pollo LoCo Holdings, Inc. (NASDAQ:LOCO) are trading sharply lower in premarket action. Both companies presented quarterly results last evening, and clearly Wall Street is disappointed in what it saw. We'll take a closer look at SHAK and LOCO below.

Same-Store Sales Sink SHAK Stock

Shake Shack delivered a top- and bottom-line beat in its third-quarter report, but the burger chain's same-store sales for the period fell short of expectations. The stock is set to open down 6.4% as a result, and it's received at least three price-target cuts in response. SunTrust Robinson, Wedbush, and Barclays lowered their respective price targets to $60, $56, and $56, and though Jefferies raised its price target to $45 from $41, that's still well below the equity's Thursday close of $54.80.

SHAK had been pulling back since its July high of $70.12, but the 200-day moving average seemingly stepped up as support, helping the security maintain a nearly 27% year-to-date lead. Some short sellers may be wishing they'd hung around a bit longer, since the number of shorted shares fell by almost 11% in the last two reporting periods. Still, almost 20% of the total float remains in the hands of these bears.

Earnings Beat Not Enough For LOCO

El Pollo Loco also topped earnings and revenue expectations, but it seems as though investors are reacting to the company's tepid full-year forecast, sending the stock down more than 5% before the open. The subsequent analyst attention has been positive, though, with Baird, SunTrust Robinson, and Jefferies all hiking their price targets. The latter firm set the bar the highest at $16.

LOCO shares have been strong on the charts, climbing from a February low near $9 to a September peak of $14.40, before settling at $12.65 on Thursday, getting some support from the 50-day moving average along the way. Most analysts are still pricing in notable upside for the security, given the average 12-month price target of $15. Overall, however, pessimism surrounds the chicken specialist, most notably among short sellers who control 8.5% of the float.